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tv   Mc Laughlin Group  PBS  August 30, 2014 12:30pm-1:01pm PDT

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>> from washington, the mclaughlin group, american original. for over three decades the sharpest minds, best sources, hardest talk. >> issue one, flash boys. >> i can confirm that the united states department of justice are investigating this practice to determine whether it violates insider trading laws. >> high frequency trading. the computerized buying and selling of stock shares at speeds measured in milliseconds. that's 1000th of a second. it is now under review by justice department and securities and exchange commission. high frequency trading or hft
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has become controversial since publication in april of the best selling flash boys, wall street revoked by michael lewis. the former solomon brothers bonds salesman portrays hft as a two tiers class system where traders profiteer at the expense of ordinary stock investors. here is how it works. stock exchanges such as new york stock exchange sell bulk information about pending buy and sell orders to high frequency trading firm. these firms use computers and proprietary software or algorithms to analyze the data and calculate at high speeds so they can buy or sell at fractions of a second in advance of orders placed by other investors locking in small profits per share multiplied by millions of trades, high frequency trading
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is highly lucrative and constitutes 50% of stock trades on u.s. exchanges. is it unfair? those with the fastest computers and best software have an advantage. is it illegal? it doesn't clearly violate insider trading laws which profit by confidential information. nor is it wire fraud which hinges on depriving a person of property or front running when a broker buys in advance of a client order, a practice barred by financial industry regulatory authority. high frequency trading falls into a more familiar category. the technological disruption. that is convulsing all aspects of american life and industry from personal privacy and how we communicate to data mining of medical records and customer transaction, driverless cars and drones, many believe. high frequency trading. the question is is it advancing too fast for policy makers and
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regulators to keep up with? >> i don't see this as our friend michael lewis who i met 20 years ago. these computers are fighting against other computers for tiny changes in the market say if someone sold 10 million shares and they catch it ahead of time. the computers are battling computers. the public, i think, half of them will benefit each time and half of it will lose from each trade that's going on. so i don't see the real malevolence in this but it ought to be looked at and ought to be looked at closely. it is a form of high speed insider trading by computers against computers. >> that doesn't sound very fair, does it? >> it's gaming the system and it's basically rich verses super rich and the rest of america is on the sidelines. i am waiting for warren to get
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on this. >> you are not knocking stock market investment? >> no. investing is fine but this is people who can locate servers fear wall street. there is competition to be as close as you can to wall street i am told. it's working on algorithms, substituting computer data. you eliminate human judgment and you know a certain number of people play this game. again, the rest of america is playing by a different set of rules. there is an adherent unfairness about this i believe. it's beyond the scope of regulators. i am waiting for elizabeth warren who understands banking and finance issues to get on this. so far she's got too many things on her plate. >> maybe hilary is advancing her position. >> well hilary clinton is going to have plenty to say about finances and so forth. i don't know that this is at the top of her list. >> advancing her opponents'
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theoretically, the woman you are talking about. >> if you look at the history of trading on wall street going back decades there are people who have -- to which they're able to get information before the market and to trade on it. this just changes the speed of it and changes the availability of the information. i think this is just going to continue. i don't know how you deal with it. i am not saying it is fair. there is no way of making sure all information is equally distributed and people are going to have an advantage whether it is trading speeds or what have you. that's the nature of the market. >> tom, martin is throwing his hands in the air saying what can you do? you can't stop it. do you believe that? >> you can impound sec with resources to go after investigations. the fbi for example, when there are too many in fbi counterterrorism -- the reduction of the spread with
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the supercomputers with the high frequency trading is all of us to some degree benefit from greater liquidity in the market. the simple fact is that technology with capitalism, technology will follow the money trail. it is something we have to grapple with. i do think there are advantages. again it isn't insider trading so much as it is technology taking advantage. >> you don't think flash traders have advantage over nonflash traders? >> they do. they make money on these. the guys on wall street always have had an advantage, getting information before everybody. now they got this new hugely sophisticated computer way of doing it. they don't get hours ahead or minutes ahead knowing. it's milliseconds but it's computers warring against computers. >> there are several investigations and they are looking into whether it violates insider trading rules. it gives certain people a
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special advantage. it's not the american way. >> hold on. revelation or rant? >> high frequency traders say their practice benefits market as long term investors by increasing liquidity and cutting transaction cost. little of this appears in lewis' book, a short coming one reviewer noted "the lack of counter balancing means flash bars sometimes feel more like a rant than an investigation." >> if flash traders are ripping off ordinary investors why are so many flocking to the stock market? >> they think they're going to make money in the stock market. let's start with that. if you follow the stock market for the last years people have made a lot of money. it is not because of flash traders. it is because of lower interest rates that pushed up market values. that's still the fundamental drive. people look for what's going to
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happen based on fundamental economic and not this. this is a small portion of what's happening and it's been going on forever. >> do you advantage yourself by flash trading? >> i almost never trade in the stock market. >> do you trade through any broker? >> i don't trade in the stock market. i invest. i do not trade. >> what is the secret of your success? >> i have a much longer term view than milliseconds. what can i tell new. >> you drive your wealth from real estate. >> and from other things. it's always long term investment whether publishing or real estate. >> you try to discourage people from playing the market. >> i think you have to be careful. i rather invest through mutual funds or other people with greater expertise than the average american picking stocks. >> i take it you play the market a lot. >> i have a small portfolio i hope will grow. i do enjoy studying the market
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and trying. you want to take advantage from an economic opportunity. the recession made depreciation a value and try and get on that before it goes up. >> half of americans are not invested. part of it is because they feel it is rigged against them. this adds to that perception. >> because they don't have money to invest. >> that too. >> does high frequency trading help or harm individual investors? >> 50/50. every time one trade is made it goes down and half of the people are happy and it goes up, the other half are unhappy. >> it's negative because it benefits a small number of people at the expense of the greater good. these people don't make anything or contribute to society. they're just pushing computer buttons. >> i think actually in the terms of the reduction of the spread there is an advantage for lower level investment. i think that is reflected in why it has support in regulatory areas and also on
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the stock market. >> i agree with that. i think it is inevitable, part of the system of the way we invest. it's been going on for years in one form or another. it's going to continue go on. >> for anyone other than day traders, the advantage is negligible. don't forget we have our own website. you can watch this program or earlier ones at any time from anywhere any world at mclaughlin.com. could anything be simpler or more character building? issue two, obama's labor rates. >> what grade would you give yourself for this year? >> good solid b plus. >> president obama has already had a fairly high estimate of his own job performance. his recent exclusive interview on air force one with economist magazine is no exception. despite presidential ratings averaging anemic 41% and 55% disapproval, in a two months
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ago poll showing plurality of americans rating him as worst president since world war ii topping george w bush, richard nixon, jimmie carter for that dubious distinction, president obama thinks he is doing well. get this, his russian reset he says worked. >> we had a very productive relationship. we got a lot of things done that we needed to get done. we have to respond with resolve in what are effectively regional challenges that russia presents. we have to make sure they don't escalate where suddenly nuclear weapons are back in the discussion of foreign policy and as long as we do that, then i think history is on our side. >> how about the economy with
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gdp growth mired at 1% and the most sluggish recovery in post war history? >> since i have come into office, there is almost no economic metric by which you couldn't say that the u.s. economy is better and that corporate bottom lines are better, none. >> regarding security in africa where libya is aflame, isis on the offense and boko haram wagering war where 300 kidnapped school girls remain missing president obama says this. >> u.s. security presence is always a source of ambivalence everywhere in the world. if we're not there, people think we're neglecting them. if we're there then they think we're mill tar eyeing a region.
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right now i think we got it about right. >> question, president obama gave himself a b plus one year into his presidency. now at five and a half years what should he give himself and why? >> john, i think most people would probably give him a c. he is very far down. what he said about russia, i think he is basically correct with regard to russia. there is nothing he can do. once they overthrew that government and what happened with crimea and the battle over luhanse. he is saying we have to million the problem. we are not -- manage the problem. we are not taking a situation where we are putting missiles in europe on either side. we can't control the situation. i don't disagree with the policy in ukraine to avoid a head on clash if he can with russia again. >> how much does the affordable care act enhance or diminish president obama's standing with
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the people? >> i want to follow up on what pat said. the president did say that america is still the indispensable nation when it comes to willingness to extend blood and resources on behalf of certain ideals but pointed out we can't do it alone and the world is too complicated to try to do it alone. that would be what you might call obama doctrine. on affordable care act he says it is messy but more people have insurance and the rate of inflation of medical care is the lowest it's been in 50 years. i do believe that affordable care actor obamacare is a permanent part of the safety net and will be regarded with the same sort of level of respect that social security and medicare is given in the future. >> do you think the affordable care act was frightening in its impact on obama's character? >> i think it certainly
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galvanized the growing sentiment on the part of large parts of the republican party and independents as well that the president was more left than perhaps he presented himself. to some degree i would agree that it will play out in the longer term. my concern is the issue of supply and demand. if you are failing to address really significant cost pressures in healthcare, if you think about the matrix that americans in terms of outcomes are paying twice or a lot of people around the world are paying regardless whether they're socialized or whatever, my concern is obamacare doesn't address fundamental cost pressures. you need massive reform to do that. i suspect moral acknowledge didn't of trying to expand healthcare has dominated the president's policy and the nation's policy away from the major structural reforms actually needed. >> the president's line was
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people could keep their insurance. did that damage his poll ratings on trustworthiness and whether he usually tells truth? he took hits in both categories. >> for good reason in my judgment but i want go to another issue. growth in the economy. it is growing. it has grown by 2.1% by for the last five years which is the lowest rate out of a recession we have had ever since the great depression. that only took place not because of the fact that the economic environment was good, it's because we have a hugely stimulating monetary policy and fiscal policy. we have run up huge national debt and undermined the value of the dollar. this is in my judgment not representing a good economic policy. there are all kinds of things that we could have done and didn't do. he has lost the confidence of the business community and the business world in terms of where it counts which is investment and new plant and equipment. >> he addresses -- >> national debt is $16
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trillion pushing 17 trillion. is it as bad as it sounds? >> yes, you are darn right it is. it will be a burden for generations. >> don't hear much about it. >> no, somehow it is taken for granted. ultimate plate it will be an issue that will affect and restrict what we can do as a country for decades. >> damaging relationships around the world? or are they taking advantage of it like china? >> i don't know. that is where the problem comes in in a way. we have a situation where we are losing the competitive edge that we had, not totally but in many areas and part is being lost to countries like china. >> the american -- >> excuse me. we are not investing to the extent that we can and that is in part because we have huge deficits which we are not devoting to these issues. >> we are not investing in those because republicans in congress won't allow us to
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invest in those. we have higher deficit than we had in the mid '80s. we are paying the same interest because interest rates are so low. we should get every dollar we can from china and we ought to use it to spend on all the things. >> okay. hold on. >> thisment's record on the economy is not as dismal as outlined. >> president obama also used the economist's interview to take swipes at republicans, the tea party, people he dubbed climate change denialists and what he told joe the plumber in 2008 about spreading the wealth around. >> my obsession since i came into office and will continue to be my obsession until i leave office and afterwards is the broader trend of an increasingly bifurcated economy where those at the top are
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getting a larger and larger share of gdp, increased productivity, corporate profits and middle class and working class families are stuck. this to me is the big challenge. how do we preserve the incredible dynamism of the capitalist system while making sure that the distribution of wealth and incomes and goods and services in the system is broadly based, widely spread? >> question, using terms conservative and liberal president obama falls into liberal category. is he more of a socialist at heart? >> what he said to joe the plumber was socialist. what he said in the interview i don't disagree with. he said i don't mind people
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having the planes and huge dividends. he said it is middle america and the people are stagnant. it's not growing. it's not fair and it's unhealthy for the society. mork can have his plane. >> the policies are not punitive. if people have their house in the hampton and their private plane enjoy it but the rest of the folks who work hard should have a chance at the american dream as well and financial inequity -- i want to finish. financial inequity will be the biggest issue. he is on that. >> the question is where does the money we spend go to? i would have spencer reports more on education. i would have -- spent more money on education. he could have reduced healthcare, increased education and you could have dramatically
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changed. >> issue 3, movers then, millennials now. >> in the past months there is no shortage of public concern over opportunities for america's millennial generation of young adults be it prospects for school, job, house, or life partner in the aftermath of the great recession. such attention is certainly well merited. the great recession was felt acutely across the american population but perhaps more so for our youth. >> so says jason furman chairman of council of economic advisors who keeps president obama informed. mr. furman is speaking about america's millennial generation, those between ages of 18 and 34 larger in number than baby boomers and some day will make up 50% of the workforce. that's of course if the millennials can find jobs. these tech savvy social media tuned in health conscious
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youngsters have plenty of reasons to worry. they are earning less than generations stalling marriages or buying homes. the unemployment rate is higher than the national average for millennials. in july the rate was at 6.2%. for millennials july's unemployment rate was 8.8%, 2.6% higher than national rate. during the great recession when unemployment peaked at 8% for those over 34, for millennials it peaked at 14%. in addition to higher youth unemployment situation, there is the level of student debt. 1.2 trillion in early 2014, more than double what it was in 2005 with about 11% of those loans considered seriously delinquent. what happens when you are young and unemployed and in debt? you move back home. so in 2013, last year, nearly one out of every three young
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adults 18 to 34 year olds were living with parents up from one of every four in 205, eight years earlier. are the millennials like you tom at risk of becoming a lost generation? >> there is a risk. i think the core concerns at least on my part with things like -- look at obamacare. the cost increases we have seen as younger americans i think are unfair. more than that the big issue is the debt. you look at 2018 onwards, deficit goes up again. we haven't had reforms to bring down national spending. i mean that in structural terms. we need medicare reform. we need social security reform. otherwise my generation will go bankrupt and also what i think is the social problem of having older americans against younger americans both calling for different types of government, one side taxes to protect spending and the other side says lower taxes to reform. it's a big issue. obviously there are benefits to
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being a younger american in this era with technology as noted a big advantage and medical advances. it's a mixed bag. there are issues from my generation and i think increasingly you are seeing people raising them. >> what's inhibiting reforms? be quick. >> i think you have lobbying groups. i think the democratic party -- owned by aarp for example. >> wait a minute, you are on sacred ground there with aarp. american association for retired people. >> john, one of the problems, america is in a state of decline itself. it's been thrown into competition with the world. there are all kinds of bright young talented hungry folks abroad and those folks are competitive with the millennials and they're doing well. >> i think the millennials are redefining how we live, the sharing economy. they're not buying cars. they're riding bikes and using
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public transportation. they're very community minded. it's a great generation. what they ought do is allow elizabeth warren to renegotiate interest rates on those loans. >> here we go. >> why should you be able to renegotiate interest rate on home mortgage with you not your student loan? >> you feel more inclined about elizabeth warren for president of the united states? >> i think she's a talented and imaginative officer in the senate. i do not think she should be president because i don't think her approach to the economy would work. >> what are your reflections on the issue of this segment? >> my own feeling is what you are seeing is a reflection that falls frankly on this generation of the millennials of a weak even on me that's been going on for a long time and look like it will continue. that is what limits economic future of the generation particularly when they're going into the labor force for the first time. that's really a critical issue. >> the reach of that situation is more far reaching so to
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speak. >> yes. >> they're just starting out. one start will be a weaker start than my generation and your generation. >> they're resilient and smart. >> predictions. >> economy flat, eu economy flat, japan is contracting, consumer sales flat. we are headed into a recession. >> no pat, no recession, forget that. >> is that a prediction? quickly. >> i had to disagree. the bank will be reorganized. >> excellent. >> chris christie republican nominee 2016 against clinton. >> really? >> we won't have a recession in the sense of the contraction of the economy but we'll have low growth for the next several years which is just as damaging. >> north atlantic treaty organization meets in wales in september. i predict the agenda will be domestic dated by events in ukraine. they have spiraled from political crisis and annexation of crimea to warfare. nato will propose higher
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defense spending and doctrines and training conquering what many perceive -- more time -- as a new threat posed by russia. i think i am speaking for the members of the panel but if i am not, we wish you a joyful labor day weekend with a minimum of labor. bye-bye.
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is provided by the gruber family foundationm and by the members of kqed. a co-production of kqed and the center for investigative reporting. vu: cutting-edge technologies changing the way police fight crime. mcnutt: what we essentially do is a live version of google earth, only with a full tivo capability. iketani: we, basically, kept it pretty hush-hush. vu: the power to track more people and data than ever before. wiltz: it's gonna be worth its weight in gold. lynch: the biggest concern is that anybody could end up being in that database. [ siren wails ] vu: where to draw the line between security and privacy? mcnutt: there is a trade-off. [ indistinct shouting ] halverson: just look here, please. vu: a look at the state of surveillance.

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